The Interplay between Innovation and Production Systems at Various Levels: The case of the Hungarian automotive industry




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НазваниеThe Interplay between Innovation and Production Systems at Various Levels: The case of the Hungarian automotive industry
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8 Conclusions


The first theoretical conclusion of the paper is that diffusion models and the notion of sectoral system of innovation and production offer a more appropriate conceptual framework to capture the actual socio-economic impacts of FDI in transition economies than the generally used spillover models. Thus, the former two concepts provide a more relevant guidance for both theoretical and policy analyses. The main reasons include that spillover models cannot ‘tackle’ (i) the fundamental restructuring of practically all sectors (and firms) due to privatisation, FDI, technological and organisational innovations, as well as entering new markets (losing the former ones); (ii) the nature and dynamics of learning and innovation processes, including the importance of co-operation and networking, required by the fact that various types of knowledge are needed for a successful innovation process, often possessed by different actors. Further, the specific sectoral features of automotive industry are not captured, either, in a standard spillover model.

Second, it is also argued that innovation systems – both sectoral and national ones – in a small, open economy are strongly influenced by the strategies of foreign firms operating in these host countries. Accordingly, the conceptual framework analysing innovation systems, originally developed in the context of large(r), advanced economies, has to be amended to grasp the important aspects of internationalisation in this different milieu. Further, internationalisation has to be understood in terms of the interplay between national, (multi-country) regional and global innovation and production systems. Hungary, characterised by an almost excessive weight of foreign firms in manufacturing industries either in terms of production or exports, can be regarded as a ‘living laboratory’ in this respect. An important research question remains, though, namely to disentangle the characteristics of small, open economies, in general, and those of small transition countries, in particular.

Automotive investment activities across borders have significantly intensified in recent years in an attempt to cut costs via re-location of production, and to get closer to the ultimate customers in emerging markets. Central Europe, the immediate neighbourhood of Hungary is no exception either: the region has moved again onto the global stage. Almost all major automotive groups have already set up their operations in Central Europe. These intensified investment activities have had crucial bearings on the Hungarian automotive industry: after a half-a-century interval – imposed by the CMEA-wide division of labour – car production has re-emerged in Hungary in the early 1990s. Suppliers have also invested heavily in Hungary. Moreover, their motivation has not been simply to follow car assemblers; on the contrary, this is only a minor part of the explanation. Their principal reason for setting up subsidiaries – either green- or brown-field plants – in Hungary has also been cost-cutting. The only major local clients for them are not car assemblers but the engine manufacturing plants of Audi and GM Opel; hence the vast majority of their output is exported.

These strategic moves have radically re-structured the indigenous suppliers, too. Several suppliers have been taken over by foreign firms, while others have been integrated into global automotive production networks as subcontractors. In both cases new products, processes and management techniques have been introduced quite rapidly. Components manufacturing is much more important in Hungary than car assembly, even from a somewhat narrow-minded macroeconomic point of view: turnover, employment and exports figures are significantly larger in the former sector than in the latter. Taking a more general perspective, that is, industrial development and competitiveness, suppliers, and particularly the networking activities of T1 suppliers, are still more substantial: it is mainly due to them that new technologies and organisational innovations are diffusing fast and widely in Hungary. From a policy point of view, however, it is necessary to take into account the differences between various types of suppliers. Therefore, a taxonomy has been developed, and applied when discussing the prospects for Hungarian companies.

Notwithstanding the huge importance of foreign firms’ strategies and other aspects of globalisation, various elements and dynamics of national innovation systems still do matter. Just to highlight one of them, that is, government policies, a major lesson can be drawn by comparing general and industry-specific schemes. It is more fruitful to create an attractive, favourable environment for R&D and innovation – e.g. by maintaining a sound, well-performing higher education and research system, providing the necessary physical and institutional infrastructure, facilitating industry-academy co-operation and other forms of networking – than focusing on the promotion of industry-specific R&D and innovation activities. It is also of crucial importance to co-ordinate investment, trade, competition, regional development, employment, education and innovation policy aims and tools to enhance competitiveness.

In sum, the successful re-structuring of the Hungarian automotive industry is not only due to some ‘push’ factors, i.e. the fierce competition among automotive companies and hence the pursuit of cost-cutting via re-location of their production, but it also thanks to ‘pull’ factors, i.e. the attractions of the Hungarian economic environment, broadly defined. Given the ever changing, and global, nature of the automotive industry, no country can be complacent; on the contrary, continuously renewed, concerted efforts and well-devised policy measures are needed to achieve further results.


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